Auto insurance industry turns up heat on government plan.

Auto insurance industry turns up heat on government plan

Of all the ideas brought to the government side of the provincial legislature by the New Democrats, none is proving to be more controversial than government-run auto insurance.

As the anticipated spring introduction of legislation nears, the insurance industry is turning up the heat on the government to back off.

While details have yet to be worked out, the government wants a system which would limit rate increases, allow compensation for pain and suffering and replace lost income.

The current system brought in last year by the former Liberal government eliminated the right of more than 90 per cent of victims to sue for compensation.

POTENTIAL DANGERS

From the industry has come a number of reports warning of the potential dangers of a government-run plan.

One report warns of massive job losses in the magnitude of 15,000 jobs within a year and 23,000 within four years.

The report also warns that an interest rate hike of one per cent would be triggered by efforts to attract money to the country to replace capital leaving with foreign-owned insurance firms. The more than $3 billion in underwriting done by the province's car insurance industry is about 60 per cent foreign-controlled.

The report was prepared by the Toronto consulting firm DRI Canada Ltd. on assumptions by Progressive Casualty Insurance Co.

It concludes that because car insurance is the primary business of many insurers, some firms would stop writing any type of insurance in Canada, meaning a further $500-million loss to the country.

A coalition representing virtually all of Ontario's insurance companies says the current no-fault car insurance system is working for consumers, and it claims that a government-run system offers no benefits.

The coalition includes the Association of Canadian Insurers, the Insurance Bureau of Canada and the Ontario Mutual Insurance Association.

Its study predicts that a public takeover would cost at least 4,000 jobs, and notes that the industry estimates it would cost about $1 billion to set up a government-run scheme similar to the one in British Columbia.

"It's our position that Ontario's current system of car insurance should be given a chance to work," says Jack Lyndon, president of the Insurance Bureau of Canada and the spokesman for the coalition. "There is every indication that it is working to the satisfaction of the driving public, brokers and insurance companies. Reforms should only be introduced if weaknesses or inequities become apparent."

Lyndon says the coalition's research shows that a government-run system could have serious consequences for consumers, taxpayers and the insurance industry. "The impact would fall most heavily on Canadian companies."

The research paper states that the government has created a false expectation of reduced rates.

"At the same time," it states, "it has created an expectation of enhanced accident benefits. The critical public policy question to be answered is: |Will public ownership satisfy the expectation of more coverage for less money?"

Lyndon argues that it will not, because, regardless of who runs the car insurance system, it has to take in enough premiums and other income to cover the costs of settling claims and running the business.

"Of course, under a government system, there is the option of having car insurance subsidized by taxpayers," Lyndon says. "But, when you consider the current economic situation in Ontario, it seems inconceivable that the government would want to indulge in this sort of unnecessary extravagance."

On the other side of the issue, the Fair Action in Insurance Reform (FAIR) committee says innocent accident victims are suffering under the current no-fault auto insurance scheme, while the insurance sector is reaping record profits.

The committee is mainly composed of lawyers opposed to the limits on lawsuits under the current no-fault system.

University of Toronto economics professor Jack Carr prepared the report which reveals that record-setting insurance profits have come at the expense of innocent accident victims.

Carr says total insurance benefits to accident victims have been cut in half under the current system.

"The savings to insurance companies from cutting benefits in half and other savings under the current plan come very close to explaining the $910-million turnaround in insurance company profits."

Lawrence Mandel, counsel to the FAIR committee, also disagrees with insurance company statements that the current system is working.

"Claims are down. But it's because the system is not working," says Mandel. "Claims are down because the rights of innocent accident victims to make claims for any pain and suffering, for full loss of income and for loss of opportunity in the future have been eliminated in 99 per cent of cases."

Mandel concludes his statement with a message for the Ontario government. It reads, "The FAIR committee supports the provincial government's stated promises to abolish the current system and to reinstate the rights of innocent victims, including access to the courts."

He also urges the government to proceed as quickly as possible with its new auto insurance package.

"By getting rid of the current scheme, the government will reduce the number of innocent accident victims who are being further victimized by this law."

RESTORED RIGHTS

The Ontario Head Injury Association (OHIA) has also voiced its support of the Ontario government's promise to restore rights to innocent accident victims.

OHIA co-founder and executive director Ray Rempel notes that the province has entered a new era in the fight for auto insurance reform.

"Fortunately, in this latest round of the insurance fight, I am confident that the government of Ontario is firmly in the victims' corner," Rempel says.

The previous Liberal government's "insurers win - victims lose" no-fault law is having negative effects on head injury victims, he adds.

"Head injury victims end up living in a painful limbo - prevented from getting the compensation they need to pick up the pieces of their lives and start again," says Rempel, who is urging the government to move forward quickly with the reforms.